The Multifamily Takeoff Podcast Presents: Multifamily Success And Build-To-Rent Industry in Southern California with Scott Choppin

Intro: This is the Multifamily Takeoff Podcast, Show Number 60. And now out of San Diego, California streaming to listeners around the world, this is the Multifamily Takeoff Podcast where we'll talk all aspects of anything multifamily real estate investing related as we host a variety of guests who are active in the apartment game. Be sure to follow the show on Instagram at The Multifamily Takeoff. Now, here are your hosts Mike Tighe, Shawn Dimartile, and Rich Somers.

Mike Tighe: Welcome in listeners. I'm your host Mike Tighe. Joining me today, co-host Shawn Dimartile, and Rich Somers. Welcome in guys.

Shawn Dimartile: What's up guys?

Rich Somers: What's up boys? How are we doing today?

Shawn: Doing good. I brought the fourth co-host right here. Kylo, he's going to be sitting in the background ready to help whenever he can.

Rich: And we get to see Kylo here in a couple of hours when we come over to your house tonight.

Shawn: That's right, man. We've got some business to discuss tonight.

Rich: That's right.

Mike: Our fourth partner Kylo, the Aussie chef. He's a cutie.

Shawn: He can really advise on you know, putting dog parks onto your property and whether or not.

Mike: That's true.

Shawn: Design and stuff like that. Yeah.

Rich: I like that.

Mike: That's a good value add strategy. We could create the dog park in that, you know, Kylo kind of test it.

Rich: Yeah Exactly.

Shawn: He can bark twice if he likes it. There we go.

Mike: Well Shawn, tell the listeners a little bit about our guest today, Scott Choppin.

Shawn: Hi Scott. So, what I love about bringing Scott on today is so many people say you can't make money in real estate in California, or if you do, it's really hard. We've talked to virtually nobody that's investing in apartments in Southern California and for a lot of good reason. Well, Scott Choppin is unique because he's a developer that's developing small apartment complexes in Southern California, but he's got a really unique strategy. So instead of, you know, building your typical apartment, that's going to have one-bedroom, two-bedroom, three-bedroom units, they have four-bedroom and five-bedroom units. He's going to tell you exactly why they decided to do that and how that's made it work for them and their investors in this episode. So, I think everybody, even if you're not investing in California, you're going to find this interesting, because like I said, nobody invests in California, right. And if they do, they're not getting good returns. Well, Scott will break that mold. They've got a really unique product that they built in new construction. So, it's really cool how he explains how they're able to accomplish it.

Rich: Yeah. I really enjoyed listening to his model. I don't hear a lot of operators out there utilizing this, so very impressive. Yeah. Thank you guys so much for listening. If you guys do like our content, don't forget to drop us a five-star review on Apple Podcasts. And without further ado, let's go ahead and bring in Scott, but not before a quick word from our show sponsor.

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Mike: Checking in from the LBC Long Beach, California, Scott Choppin. Did I get the last name right? Scott, welcome in.

Scott Choppin: Yeah. You did it perfect. Yeah.

Mike: Awesome.

Scott: Pronounced it perfectly. I appreciate that.

Mike: That's bad for me, Scott, I usually ask our listeners before we hit the record button.

Scott: Yeah. Wait, how did I say that again? I'm sorry. It's like natural conversation. So, like, Hey.

Shawn: Yeah, we just let it flow.

Mike: Well, let's rock and roll here, Scott. So, tell us a little bit about your background and what brought you to real estate investing.

Scott: So, I have a family background in real estate development. So, you know, grew up around my dad, Kerry and my Uncle Mike were both real estate developers focused predominantly in the apartment. So, building new apartment buildings and owning and investing in them, you know, in that sector. Although there are some other product condos and some office space, and this goes back to the early sixties, really 1960 is when our family started in the real estate development space. So, grew up around it, but also like lots of teenagers, like for a period of time, it's like exactly what I didn't want to do. Right? Like, you know, whatever your parents do you go, "Oh like, not that." So, I got out of high school and worked actually in the electrical construction trades for a couple of years, just to earn some money. Learned a lot about working in the field of construction, but a couple of key events happened for me that really said, you know, I don't want to do construction because that's not a long-lasting career physically or monetarily. Working on a project when I was doing electrical work, saw the developer like arrive at the site and sort of do what developers do when they show up on-site, which is, you know, boss people around and, you know, look badass. And I said I know who that dude is. I want to be that guy.

And really most importantly, just in my ongoing, you know, post-high school education, I read a lot. I still do. And so, I read several books that were really in that domain of real estate investing and they were old, you know, this would be the mid-eighties. So, they were old schoolbooks, but that taught me what deal-making was. So, although I had a family background in real estate development, I didn't know what deal-making was, right. Like I saw buildings being built and like saw what my family did, but I didn't understand like necessarily the economics and the profit potential for it. So, at like 18, 19 years old, finally, the light bulb went off. I go, "Oh, this is what these guys are doing." And you know, like, this is how you make money and, you know, sort of ridiculously, buy low and sell high and real estate development is a version of that. So, I was very fortunate. I'm very grateful. But really since that day, since that, you know, 18, 19 years old made that decision, that's all I've ever done. All I've ever focused on. In fact, I'll share with you guys. I don't really even think of myself as a real estate investor. I used to say investment and development were the same thing, but they're really not. I do build new buildings that we then own and invest in. But it's a really very different domain to execute in besides, you know, just investing straight ahead.

Mike: Yeah. You're more of an entrepreneur. It sounds like real estate entrepreneur. Is that how you identify yourself?

Scott: Yeah. I think so. I mean, I think investors are real estate entrepreneurs too, but I think that you know if I'm listening to your question, so to agree with what you're saying, we find the opportunity and we create it and we shape it and we put our expertise and we research the market. And so, you have to sort of create this deal out of nothing or, you know, multiple ingredients that make it up. But it's then in the combination of it, and that is different than, "Hey, I decided I want to buy apartment buildings in Downtown Chattanooga and here's what's on the market." And I'm not like downplaying the complexity of that, right. To be a good investor is a skill set within itself. But we have to, you know, see, and find an empty piece of land and then create all those things that then build a building and have us then own the apartments when they're done.

Shawn: So, when you're doing this kind of a business plan, are you raising money from investors similar to a syndicator would except you're just doing it for new builds.

Scott: Yeah, exactly. I mean, every flavor Shawn, that you could think of. So, friends and family, you know, straight ahead, you know normal syndication, family offices, high net worth, and then, you know, institutional. So, we've done multiple, multiple institutional equity deals. So, we have one investor think like a Carlyle Group or a warehouse or, you know, big fund managers and then I'll just share with you guys. In fact, you guys will be the first to hear it. We're actually now in the process of putting together a $30 million equity fund. That will be the fund manager and raise the capital and then that equity will be a pool of capital that will go into this. We talked about it before we started the interview, but our specific type of workforce housing, we call Urban Town House or UTH is sort of this unique model of workforce housing that we do.
So, we're pairing the equity fund and fund management together with the development model and business plan and then putting those two together. And then our team is really an institutional capital-raising team. So, think, you know, capital-raising people with their networks, attorneys, accountants, all institutional grade, and then we'll expect to do actually several of those funds. Workforce housing, I didn't share with you earlier, is really a very hot topic in the media. And particularly now that we're in the midst of the pandemic, you know, serving families and renters affordably, given the economic stress, that's on everybody. And then, you know, we're all in California. I mean, that was the story for housing being a stressor economically, it's been going back for decades. So, our model really is to resolve that and then the fund would help to facilitate that.

Shawn: Let's get into that a little bit. I know we talked about it a little bit before we went online. So, tell our listeners what your bread and butter is? We talked about that slightly before we got online and also where you're doing these developments?

Scott: Yeah.

Shawn: Cities?

Scott: So, we've always been an apartment development shop. We've done condos. We've done affordable housing, right. Like low-income housing. And then we've done straight ahead apartments. But are all new construction or development, meaning finding land and/or underutilized sites, designing, building, renting, and owning new apartment projects. And that, you know, different than just finding deals and investing in them, right. And so, our product type that, well back up a little bit. So, we've done several different categories within that residential domain. Although really, if I look at our history, we're really apartment guys, right. You know, building apartment projects is our main food group, if you will. Over the last three or four years, we've really identified a specific part of the marketplace that we describe as workforce housing. So that would be families and renters that sit in between your true, affordable, right. Government-subsidized, affordable housing, and then your luxury, you know, high rise, you know, for you guys to be Downtown San Diego, the super sexy 50th-floor rental housing or stuff that's in that domain. Really high income, you know, smaller units, studios, and ones.
So in between those two spaces are, you know a middle market. In fact, some people call it missing middle and that has several definitions. But for us, we focused on working-class families that have multiple earners. So, think of a family that has maybe six people. You probably have two or three adults in that family that are all working and importantly they're pooling their economics. So, they're sharing incomes and expenses across the family group. We call it multi-generational also, right. So, you'd have grandparents, parents, and then adult kids or small kids, right. And that's really a big part of the demographic in Southern California, you guys in San Diego, us here in Los Angeles, and Orange County. And it's a hugely underserved demographic, right. So, if you're a family that has three income earners and everybody makes 40,000 or 50,000 a year, like each earner earns that. Individually, they wouldn't meet the criteria to rent a new unit or afford new housing or housing at all successfully. Like what you see in the media, oh, you need to earn, you know $60 an hour to afford the average two-bedroom unit or whatever the stat is. I'm getting the numbers wrong.

Shawn: Yeah. They're probably in the low.

Scott: Yeah. Right.

Shawn: In California.

Scott: So, here's the interesting thing, when you start to put those people together and then they have three incomes at 120,000 or 150,000, that is a game-changer because now they can afford housing. So, our urban townhouse type of unit or that's the brand we have, our UTH for short, is a five-bedroom, four-bath rental townhouse. So, it's a three-story unit, garage, two-car direct access private garage on the ground floor, bedroom, bathroom on the ground floor and then kitchen dining living and another bedroom bathroom on the middle floor and then three bedrooms, two baths on the top floor. And so, with this unit type, it gives a place for those multi-earner multi-generational families to live and practice this economic sharing lifestyle. They're already living it, right. They just don't have a housing format that serves them appropriately. And I'm not saying there are not rental houses that they can go rent. A lot of times we'll see them in, you know, two different apartment units. Maybe they're adjacent or maybe they live a block apart, right.

But they're practicing this economic sharing lifestyle. And then more recently, as I alluded to earlier during the pandemic where people are starting to work from home, work remotely, we're seeing a huge uptake in roommate groups or roommate’s situations that are what I call location agnostic. Like their company said, "Hey, go work wherever. We don't care. Just, you know, you've got to work virtually and be successful at it." So, people are starting to choose who they live with and where they live. Completely independent of oh, I worked in San Mateo or I worked in East Lake, right. And I got to live there because my job is there, so I get roommates or whatever. Now they move wherever the heck they want, right.

So, we're a beneficiary of that because you know our projects because they have five-bedroom units, all of a sudden, these people go, "Oh, we have three renters." Usually, they make pretty good money and they'll rent three and live in three bedrooms. And then the two extra bedrooms become work from home space. In fact, all our units have this ground floor, bedroom, bathroom, perfect office, you know, home office space. And then, you know, just a few odds and ends. So, our units are all townhouses. So, they all have a garage, which, you know, I don't know about you guys, but I never had a two-car garage in any apartment I ever lived in. Like that would have been like a huge luxury. In-unit laundry, central air, right. Which, you know, in market rate, apartment housing is very standard. But if you're this renter family that's coming from Santa Ana or Garden Grove or wherever, and you're coming out of older apartments and now, all of a sudden you have all these luxuries, a garage, and in-unit laundry and air conditioning. So, it's a game-changer for them.

And then, you know, on top of that, our density really allows our units. So, when you go out the front door, you're going out into outdoors. Like there are no common hallways. There are no elevators. No entry foyers. And then on the backside would be your garage and your driveway. So pretty unique. And, you know, accelerating significantly, both in the context of this affordable housing these renter families, high demand to low supply there and then just a major uptick in this roommate situation relative to the pandemic.

Shawn: Scott, I'm curious, how do you guys test the demand in a market for a four-bedroom or five-bedroom unit such as that? I mean, we're currently underwriting a deal about an hour north of Indianapolis and they have vacancy issues with their four-bedroom units. They've been really struggling this year to lease them up. So how do you guys test the waters with that?

Scott: So, a couple of different answers, but great question. So, in my background, working professionally, so worked in the trades for a couple of years, went to college here in California at Cal Poly San Luis Obispo got out, graduated. And then I went to work for a few years for other professional companies that, you know, to learn the business right. To learn it, you know, in a truly professional way. One of the companies I worked for was a subsidiary of a company, you guys now know as KB Home, or it used to be Kaufman and Broad in the old days and that division built affordable housing. And a lot of the housing that we built was for families, right. These were low-income families that rented in these government-subsidized units. For a period of time, we used to build in that program four-bedroom apartment units and LA and Orange County was predominantly where these showed up always way oversubscribed, right. Like we had families that were just like, couldn't find four-bedroom apartment units. And particularly these were very low rent because they were subsidized.

But that as we started to develop this UTH program, that was in my background, I go, I knew we always had this family renter demographic that was always underserved, right. Like there are just not many depending on what market you're in. Like LA, like in Long Beach where we're based, where I grew up, and where I live now, you know, the predominant stock is two-bedroom units. Like in the sixties and seventies and eighties, right, everybody did two bedrooms. Like that was the product du jour, right. Now in new housing, everybody's doing studio and one-bedrooms, right. For the really new, higher-end stuff that's, you know, for a younger demographic. But nowhere in there is somebody doing four and certainly not doing five bedrooms. Only in houses would you find that, right. So, it's pretty rare.

Rich: Sure. Do you guys find yourself competing with the single-family home market?

Scott: You know, in the beginning, we thought that right. I always, you know, so when we started this program, we purposely started on an experimental basis. On three, really four projects in what I call the demonstration phase, and this is part of your answer to your question. Like we knew this was a differentiated product and there are no like costs. You can't go out and find a bunch of four-bedroom comps and go, "Oh, well, what is everybody else doing to rent now?" Only houses. So that was one of the things that guided us. Like, we go, "Oh, what is a house price for a five-bedroom in the local market that we're building and use that as a proxy." But really the answer is to both of your questions is we had to experiment in the beginning, and we did it on four small projects in this demonstration phase because we needed to prove that we could rent them for these rents that made it make sense, right. Nobody is doing this at scale.

There's a scattering of small projects throughout the LA base and the people doing this. So, there's some small like scale, you know, evidence of demand, but to do it in markets outside of Central LA was unknown and it's at the scale, right. We're now doing projects that are 15 units up to 85 units, right. So totally unprecedented on the size and with this particular unit mix. So, we had to build these things and do it in a way that if the experiment was a failure like we got to complete and we go open the doors and nobody wants four bedrooms or five bedrooms. You know, we didn't want to get hosed in the deal.

So, we did those first four projects on really inexpensive land. You know, we built it. You know, we did a lot of work internally, really to keep costs low, keep it super-efficient. So that I told my team, look, if this blows up in our face, like, you know, we're not going to die. Like the company will survive. But it ends up, I'll share a little anecdote. So, our first project was a duplex, right. I've never done a two-unit project in my life, right. Like, you know, we're doing institutional-grade apartment buildings for years and years. But I knew this deal. I didn't want it to fail and crush us. So, I took a two-unit project, right. So, we sold that building when it was complete to a new owner who wanted it to be rented empty. They said, "Hey, we want to pick the tenants." We go, "Fine." They were paying us a good price. We didn't have to rent it. We didn't have to deal with all that. So, we sold it.

We had underwritten 2650 for four-bedroom town house units. This is the first project, so the design was a little bit different, four bedrooms, not five. They turned around and they put the units on the market at 3250, like the next day. And they got, one of them rented at 3250 and the other one at 2950. So, I called the guy I was partnered with on the deal. And I said, "Dude, did we screw up or what?" Like how did we miss this? And that was really the beginning of understanding what the UTH model has now turned into, which is this multiple formats like, you know, demand in multiple formats that just is completely untested and unknown. So, it was a little bit of market comparable, research, our own history, and then this experimenting to come together to really know.

And even now, I mean, we're on our sixth and seventh projects and I'm still not fully satisfied that we know all there is to know about the marketplace. But what I do know is that this middle market, you know, these median income families, middle-income families, and these roommates are not being served in any way, right? The demand is off the charts and we're in California where you guys know building new housing is a very restrictive, difficult process. So, when I put all those two together or all those together, I go, "Oh, I think this is a good story. Let's test it." Go through the testing phase it's been a success. Now we're ramping up into the production phase.

Shawn: That's awesome. I can really see it totally makes sense too. And I can understand how there's an enormous demand for that. And Southern California especially maybe other markets like, you know, North of Indianapolis, like we were talking about it wouldn't work as much. But here like you alluded to earlier on the show, people are increasingly looking to have roommates and even maybe other families as roommates to reduce their living costs. Because I mean, for our listeners that don't live in California, never have, to give you an idea of what rental units cost in San Diego. I'm currently renting an apartment. It's a one-bedroom about a thousand square feet, and I pay $2,700 a month. Now granted, this is a nice apartment complex. But I'm sure there are people listening in the Midwest that are, I just blew their mind probably because they couldn't even imagine something like that.

Scott: They're like 800 is my number for a two-bedroom in Indianapolis, right.

Shawn: Yeah.

Scott: So, let me share. So, we rent our five-bedroom units at 3,500 bucks a month.

Shawn: Not bad.

Mike: What market is this? LA?

Scott: Yeah. LA, I think like, you know, Southern, Central LA Base in a Northern Orange County, right.

Shawn: That's affordable.

Scott: Now we know we're at market for that sector, right, and though that rent makes our deals work. By the way, you know, a lot of inflation comes in. We've got a lot of stimulus money coming into the market. Multi-family has been relatively healthy during this pandemic, besides the collection issues, which, you know, we've had like zero collection issues in our small portfolio of these projects. It is two bucks a foot, right. And you know, and apartment world in California, I mean to make deals work, you've got to be at 3, 3.54, 4.50, 5 and 6 bucks a foot for new housing if you're in a market like Santa Monica on the Westside, you know. But more importantly is the metric we use is actually a per bedroom rent, right. So, when a family comes in, nobody calculates the per square foot. They don't even ask. They go, does it get a number of bedrooms and a garage and the living room? And if my furniture can fit, right? The normal leasing conversations. But what they do, we do see them as they go, "Oh, I've got five bedrooms, you know, 3,500 a month, you know, 700 per bedroom. You know my wife and I go up here, mother-in-law will go in there. Adult child will go into that third bedroom. And then they start to do the math, right. Monthly divided by bedrooms. That's really where they live.

Shawn: Exactly. So, you talked about the smaller deals is where you started to kind of test this out. And I think I heard, you mentioned, you've gotten up to like 85 units or something now. So how many total units have you done these sorts of projects with and what are the sizes now that you're competing moving forward?

Scott: Yeah. So right now, we have completed five projects. The first four were small and then the fifth project was 15 units. And then the rest of the pipeline that we're working on now. Right now, we have about 150 to 200 units, roughly either completed and, or in development. And then beyond that, we're tracking several new projects. So, you know, we'd like to do about three to 500 units a year in the LA Orange County marketplace. That's a good production number for what our team can perform at. And, you know, we'll build that if we can. But you know, as you guys know, being in San Diego, in fact, San Diego yesterday was the most restricted land market in the United States as far as single-family homes lots ready to build. And that's not necessarily applicable with multifamily. But I think it's just, you know, you've got terrain in San Diego. You got the ocean. You know, you got Mexico in the South, although not San Diego proper. But you know, we're land constraint in California although, we have tons of land. But it's just zoned, right. [Inaudible24:47] correctly, correctly located, correctly zoned, correct price. Where it's like a magic formula to get land that works.

Mike: If only we didn't have all the bureaucracy and red tape here and we'd be good to go.

Shawn: I mean was going to ask you about that.

Scott: Yeah.

Shawn: I was going to ask you, can you kind of go through what that process is like to do a new build? Like I've heard it's a nightmare in Southern California. I've heard that it takes forever to bust through all the bureaucracy and red tape to finally get a deal done. So, when you guys are looking for a deal and maybe find a spot of land that might work, how long does it take you to go through all that and actually get this thing built?

Scott: So, I would first answer your question. This is what I'm about to describe happens in every part of California, right. California, from a state-level planning law standpoint, is the most difficult place to do business in the United States. Maybe you like, you've got New York and New Jersey would be a close second, third. Right. So, whether you guys, whether it's San Diego or LA or San Francisco, or I think any urbanized area, like the difficulty level, is going to range San Francisco's the hardest. You know, Inland Empire in Central California probably would be the easiest, right. And then places like Southern California are right in between. So, it is difficult. It is constrained. It is politically like the most difficult place, right. Like we have a lot of people that are here, NIMBYs, not in my backyard that doesn't want more new housing and particularly don't want more new apartments.

Like, you know, you go into some cities and you say, "I'm going to do a new apartment development. And they'll like, "No, no. You've got to leave. Like not here." So, what we do is, you know, you can either do entitlements where you can buy a piece or put a piece of land in escrow and then change the zoning to conform with what you want to build, right. What I call the entitlement process, gaining governmental approvals, but we know that process so well. And we know the California market so well that we actually, one of the criteria that we have for our UTH projects is to acquire land that's already zoned, right. Like we don't have to do that. So, we can go straight into plan check. Now there's some friction around the edges.

So, this setback and that parking ratio and that common space, open common space requirements. So, we'll sort of negotiate the deal inside of that. But we really don't want, you know, multi-year heavy-lift entitlement processes where we got to do EIR, environmental impact report, and general plan amendment rezone. These are all the big, you know, heavy-lift entitlements. I call them, right. Where you've got to go in front of the politicians, planning commissioner, and city council. We don't want to do any of that. And it's because we know that so well that we go, let's skip that and that's one of the logics in the reduction of complexity that we work on through our whole entire system of building this product type that really serves the profitability at the end, right. So, if we skip the entitlement process, we could cut 6, 12, 18 months out of the timeline for development. And yeah, it's a little bit harder to find zone sites. Like some people, your audience of California goes, "Oh dude, there's no zone sites. Like what he's talking about. He's crazy." There are. They're more difficult to find.

Like we talked about before our product, the UTH product is an A product that goes in B and C neighborhoods. This is a key advantage for us because when we're in a C neighborhood, think working-class blue-collar neighborhood, that's not where all the other developers want to be, right. They want high-end neighborhoods. You know, they want the sexy gentrifying neighborhood. You know in LA it'd be like Echo Park and Silver Lake, right where all the cool coffee shops are and the Hollywood hipsters, you know, they live there. We're not that. Like I tell brokers, don't send me any of that land because we won't afford it. We can't afford it and that's not where our tenant base, that's not where they choose to live. So, by picking these neighborhoods, we eliminate or reduce competition. We pick sites that are zoned and all that basically is multiple different ways that we operate and find new deals in order to make them more efficient from a time standpoint so that we can deliver the unit sooner.

Get the rental income sooner, which as, you know, as you guys would expect drives the returns, internal rates return, or return on investment higher, right. Our job as a developer/investor is to produce yield for our investors and ourselves, right in these projects. And the shorter the time period we can make from beginning to when we're generating rent, the shorter that time is the more of the returns are going to be, right. Plus, we mitigate risk or reduce risks by going faster. Like right now we're in a story that with all the stimulus money in the economy, that commodities and real inflation are going to be a factor that we have sort of has been hidden from us by, you know, governmental agencies that report these sorts of things. But if you guys, anybody who's tracking lumber, lumber's gone up like 300%. Now part of that is inflation from the stimulus and all the money chasing goods and services in the economy. It also supplies disruption from coronavirus, right. People are sick and plants are shutting down. But we're really in a story of having to manage that commodity increase. Copper, right. You know steel, wood, concrete, you know.

And that's actually right now if you were to ask me, what's the biggest problem you're working on solving it's that we're looking in a future in the next three to even one to five years of significant commodity increase. Now inflation should increase the value of assets that we build, right. So, the end value will be inflated and that the rent should be inflated, and the cost should be inflated. Those all should go and rise together, assuming all the stimulus money, the dollars chasing goods and services. But the rate of change will be different between the value of the asset and the lumber price or the rent that we can charge a tenant. And, you know, we're obviously we're encouraging families to live in our units. So, you know, we have to manage that too, right. Like appropriately from a social impact standpoint, like, you know, we do have to charge highest in best rent. We are a market-rate offer. We don't take government subsidies. We have no limit on the rents that we can charge, but our social ethic is to help these families find a good place to live but, you know, and roommates too. So, these are just one of many challenges that we have, and I know that was a long answer to your question. But hopefully, that covers it.

Rich: I love that you're not competing with the constant new supply and new build that you see in a lot of these eight areas. Can you explain to us what is the typical business plan going in after you complete your lease-up phase? Are you guys typically looking to sell or are you looking to refinance into some longer-term debt and hold it? And if so, what is your typical hold period look like?

Scott: So, yeah, a couple of different answers. Great question. So, at the beginning and all that demonstration phase, we designed to sell those projects, right. We needed to prove the values of the apartments because they're so different. Like the type of unit and the rent that they generate the valuation characteristics, and the economics of the deals are very different from the standard apartment deal that you would sell, right. You know I got a bunch of one and two-bedroom units in San Diego. Like we can comp that out. We know you've talked to investment sales brokers. You know the Marcus Millichap guys, the Seabury guys, we know what that market is valued at, right. But five-bedroom units’ apartments don't exist, right? So, in a sales comparable conversation, that was the third part of the experiment in that early phase is what's the value when we're done. What has it appraised? We'd do perm loan or how does it value at sale, right?

So, we basically wrapped up the demonstration phase, prove the model, right? Really three things. We could rent it for what we projected. We could build it for what we projected. And then what I just said, we can value, right and appropriately to make money for investors and ourselves. And we prove those out. In the early phase, so then about two years ago, I do a ton of reading, you know went through the 2008 recession learned a ton of very valuable lessons in that. And one of them was to be very brutal in my assessment of the economic cycle to be very rigorous about our assessment of how multifamily and new apartment rentals would perform in a downturn. And to just be sort of, I don't want to use the word paranoid, but vigilant is the term I use, but just be very watchful from say 2011 through 2016, 2017. It was a good upright, guys. I mean we're coming out of the recession. You could still buy land cheap in 2011, 2012, 2013. We had a good ride up.

But then in 2017, we started, we would just go, you know. It's just one of the things that triggered me is when they started to say, "Hey, we're in the longest or getting near the longest economic expansion in US history." You guys remember seeing that in the media, ended up being about 10 years, about quite 11, when we got to early 2020 when the pandemic hit. And that was happening, the yield curve turned negative in 2019. So, we started to change our business plan really for two purposes to a long-term hold model. So one was, we liked the product so much and believe in the story of and the social impact of it. Also, it's future benefit, right. It's hard to develop in California. So, if you get something developed, you know, you're not going to have tons of competition. And particularly in our product type differentiates, right. Keeps competition out. But we really started to think about the economic cycle, right. Like what is going to happen when an economic recession comes? Basically, we were in the story like it's coming, right. The recession's going to appear. How it will appear? What it will be exactly? What it will be? We didn't know. But we started about two years ago to just feel it. See some economic indicators. So, we converted everything to long-term hold to answer your question. So now everything we will build and hold it long-term. So, we finish it, stabilize it, fund a perm loan, and then we'll hold it in, you know, an ever-growing portfolio of these projects throughout Southern California.

And then as I indicated, I don't know if this is the beginning of the interview or before we got on the interview, we're forming this equity fund and that really is sort of going to be, you know, that fund plus follow on funds will be the ultimate long term hold vehicle for the portfolio of these UTH assets to then, you know, bring in institutional capital, hold them with us as the fund manager and the GP and the LP capital to then hold those five to seven years. And so be oriented around a much longer time horizon. Then, you know, our logic is that, you know, if we started to convert those two years ago and a recession came, we didn't have to sell in the middle of the recession. That was the lesson we learned in 2008 is if you're a developer and your maturity for your construction loan comes due in the middle of a downturn and you have no exit, you're screwed, right. To be real blunt about it. And so, we said like, we don't ever want to be there. But what we did assess when you look at the 2008 downturn in Southern California, look at rental rates, actually, the market was flat in 09, 2008, 2009, 2010, which flat doesn't sound very exciting. But when the rest of the economy in 2008 is imploding, right. It's falling, you know, Vegas was 80% down on for sale values for houses in Vegas and 2008, 2009. Flats, pretty dang good, right.

So, we said, look if we can hold these assets and not have any debt maturity or any sort of for sale, and we have these stable, you know, family tenants, right that have strong social networks locally. They work locally. Their kids are in school. Church is down the road. Extended families close by. We could depend on those tenants to be very sticky, right. They're going to stick around. They're not going to move where if you had like a Gen Z, somebody who's 20 years old and you know, they just got their first job in LA and they rent an apartment and then the economy goes against them. Well, rightly so, they should like move out of that unit and go somewhere where with roommates or maybe they go home and nothing wrong with that. There's another version of economic sharing. I just said, as a company strategically, we don't want to rent to those folks, nothing wrong. Great demographic, actually Gen Z and millennials, the largest demographic cohort in US history. It's an appropriate demographic to serve, except that in a recession, they're mobile. Nothing to tie them down. No kids. You know their job is probably easier to change or they lose it, which is unfortunate. You know their families probably in another place. So, they're going to be mobile and rightly so, that's perfectly appropriate for their life cycle.

I just said we want to prefer or rent or focus on families or people that will stick around. And that would then be a defensive model for us to hold through the long term or hold long term through the recession and out the other side. Which when we look at asset values from pre-2008 through 2008 to say now or, you know like within the last year, so multi-family assets in Southern California have increased in value tremendously. And if we just say, hey, all we've got to do is be neutral for the next three or four years. Then look forward to appreciation beyond that and we've got three or four years left on our investment window. Then, you know, that's a good position to be in. I mean, I argue inside guys. We want to hold these projects forever. So, we may buy them out of the fund. You know, when the fund life cycle is complete. You know, maybe it's some roll it into a REIT or raises new equity. But from a legacy standpoint, we want to own this forever.

Rich: Sure. Hey, speaking of market cycles, we touched on this a lot in our show and we also discuss a lot about, you know, long term multifamily lending options. I'm curious, what are the capital markets like in today's climate for new construction, ground-up development?

Scott: Yeah. Great question. So, in March, April, May, June, July was very quiet. Everybody, any professional lender who had gone through any of the last recession depending on how old they were like, knows to just go stop, right? Don't do anything, right. Hold. And so, people did that for a while. But then, you know, I remember having conversations. I had a guy who was like he has networks of investors. I don't call them a broker that wouldn't do justice to the role that he plays. But this dude was like, you know nice guy. But he was ready to throw himself off a bridge. And I just remember sitting there thinking, I go, I didn't feel that. I mean, yes, it was dramatic March and April were awful, right. We're all disrupted. And who the hell knew of coronavirus is going to be, you know, going to come in your house and get you and drag out the front door or whatever you guys get the point.

Everybody was in that mode. Everybody was freaked out. Maybe some were calm and stopping somewhere, you know, almost on the verge of panic and ready to divest assets. But when we got into like July and August, and we saw particularly the rent collections, National Multi-Housing Council has something called the Rent Tracker. If you look up NMHC Rent Tracker, they'll show the collection rates. And you know, the collection rates were one to three basis points down over year to year, but not falling off the cliff, right down to zero. Where everybody's like, oh my God, it's going to be, you know, they're going to collect nothing. And in the last couple of months, it's actually trended down a little bit more. Like as this one is sustained, you know, economic shutdown, and you're starting to see people who can't hold out anymore. But in relative terms, multifamily compared to lots of other real estate categories is actually in reasonably good shape. You know, I wouldn't want to be in retail right now. I wouldn't want to be in hotels, right. Those guys office is getting hit very hard and I don't wish that by the way. I mean, this is like I've been through it. And you know, if you're the product that the recession wants to come and take from you, it's not a fun place to be.

So, lenders are starting to come back and then when that first stimulus came in, like April, that was the first stimulus that shored up the secondary markets for a lot of the, what I call public lenders. So, you think your Fannie Mae, Freddie Mac's, you know, for about a two or three-week period, they stopped. And then the stimulus came and that backstop them. And they obviously got some direction from the treasury, whoever runs Fannie Mae, you know, oversees that and they came back into the market. And Fannie and Freddie were actually sort of the go-to lender and their programs were pretty good anyway. So, they were back in the market. So, from a perm loan product, those guys came back. A lot of your commercial banks were pulled back, right? The banks were very wary. After going through 2008, they didn't want to take any additional risk. Then we worked sometimes with private lenders, right. So, think like a lending or a debt fund. Those guys pulled back for a while also. And then actually we've seen a recovery in that space, particularly. Now for us, the short answer is we have a lot of relationship lenders and particularly people that have seen our UTH product perform both in the beginning and the middle, and now where we are in the pandemic, our products actually accelerated, right, from these roommate groups that we described.

We're leasing projects at five a month on new housing at two to 500 a month over our pro forma underwriting from last year and that's compared to a lot of new housing that the absorption rates are falling in per median rents. In Downtown San Francisco's 27%. Now that's very unusual, like a San Francisco is its own like dynamic, for demand new housing or demand for housing given the tech business. LA is different than that. But nonetheless places like Downtown LA, probably Downtown San Diego to some degree, although I will say San Diego is actually done relatively well compared to Southern California and in this housing, performance values and multifamily rents have been relatively stable and strong compared to SoCal.

Shawn: I'm curious because we've talked a little bit about your fund that you're going to be, the equity funds you're going to be raising here very soon. And just about raising money individually for some of these projects as well. But it seems like the traditional dogma and real estate investing is that it's really hard to make good returns in California. That's why so many California people invest out of state ourselves included. What kind of returns can your investors expect on these deals?

Scott: So this is one of the beauties of this. I mean, and we feel very fortunate that we've like landed on this. We created the animation UTH. So programmatically for the projects that we've sold are valued, we're at a 22.6 in former rate of return. On average, over about a two-year period. You know in general terms your listeners who have done investment in new construction versus value add, your value add is always going to be a little bit lower IRR. I know I've seen individual deals that seem to be well. Development has a perceived and sometimes correct higher risk profile, right. You've got no building, no tenants, no cash flow, right. Comparative to if you buy a value-add deal that may exist and have cash flowing occupancy.

But that's really also its advantage, right. Like we think of, one of the ways we think of housing assets right now is recession prone versus recession resilient, right. And if you apply that to the multi-family sector in any product type that you would see in that existing assets or new assets, one of the things that we see for our UTH models, it's a recession resilient. It actually benefits from the harm of a recession because kids move home with their families, roommates come together to economic share, right. That's why economic sharing is such a key thing for us. I can't say that about all asset types, right. New housing for studios in Downtown LA you knows, their absorptions are lowering. So, we're seeing a good performance. So, let me check. Because I felt like I missed your question. [Inaudible 44:49].

Shawn: No. You nailed it. That was exactly what I was curious about. I was curious about what kind of IRR? What kind of returns in general are you able to accomplish on that kind of product? But it makes sense though, because I feel like in Southern California, in order to make it work, you kind of have to have your own niche that's able to tackle some of the problems or solve some of the problems that renters have here in Southern California. Because if you try to do a lot of traditional investing, in Southern California like if you try to buy a single-family house and rent that out, you're not going to be very successful.

Scott: It's too expensive. Yeah.

Shawn: Yeah. So, you definitely have to have some other type of model. And I think that you found that like putting in these large units where a lot of people can get in there and rent and split up the rent, you're able to charge a premium, which they can then afford. And that seems to make that model work.

Scott: Yeah. I agree with that. I think to make stuff work in California, you have to differentiate it somehow. It can't be what everybody...Like if you go to Texas, if you to go to Houston Dallas, or Austin on the periphery, you know, they're going to do their two and three stories standard apartment buildings may be over a podium structure underneath, you know if they're in the downtown. And we do that, or people do that in California as well. Except the rents are way higher. The land is way higher. Construction costs are way higher. So, but here's the thing, if you can figure that model out and do it in California, then you have this interesting low, right? What Berkshire Hathaway, Warren Buffett calls a moat around your business, which is a protective, something protective around your business model that has not everybody else is able to do what you do, right.

If we built widgets, anybody can build a widget. But you know if you have this protective. Now building apartments in California is not like lots of people do it. But our product category, our neighborhoods, like a lot of people don't want to go to [inaudible46:31]. That's fine. I'm great. So that is, you know, would be an example of differentiation that keeps competition at Bay. And so, you know, a big part of my role as a CEO in strategic planning is to be thinking about how can we do things in a way that keeps competition at Bay or has this compete markets that are less competed for? I figure that we have several years of, you know, lower competition in this townhome rental space. And then people start to pick up on. In fact, the build-to-rent industry, and the industry where they go building single-family homes or what I would call ours as rental homes or attached homes is a newly growing part of that multi-family marketplace. It's just predominately not in California, right.

Like, so it'd be in Texas or, you know, say Atlanta or Florida where they'd buy a subdivision and build out what looks like single-family houses that would sell, except they rent them. Then they hold them in these large portfolios of, you know, what a master plan subdivision rental projects. That's one form of build to rent. Ours is a different form that happens to be very specific to California. The reason we attach the units instead of splitting them apart and having them separate because land costs are expensive. Construction's more expensive. So, the solution to that is to join units or row home style makes a little bit more cost-efficient, use land a little bit more efficiently and so there are several little variables that we tweak to make it work.

Mike: What I love about your approach to this workforce housing crisis in Southern California, as you're taking the contrarian approach most people are making smaller units and cramming more people into less space.

Scott: Yeah.

Mike: I know you see this all over China. If our listeners are curious, just Google China workforce housing or economic housing, and you'll see efficiencies that are less than 300 square feet where they're just cramming people in and, you know, charging a little bit less so these people can afford that. They're also doing that in San Francisco and now in California, converting hotels in these efficiencies. So, you're taking kind of the opposite approach and going with bigger spaces where more people are going to live in it and live under that one roof and split that rent. So, I think that's really creative and I like that it's working great for you obviously.

Scott: Yeah. So, I'll share an anecdote. So, I'm on the executive committee for the USC Lusk Center and Richard Green is the executive director. I met with him probably two, I don't know, two years ago, maybe a year and a half ago. And he had a great observation when we talked about our product, UTH, he goes, "You know it's interesting, you're not doing density in units. You're doing density in bedrooms." And when he said that, I was like, you know, that's exactly right. I'd never thought of it that way. And so, in reference to what you're saying is those micro-units are like a bedroom with some stuff with it, you know. A little bit of kitchen, a little bit of bathroom, right? And so, by splitting those into micro-units, you're able to share the economics in a specific unit designation, right. We're doing a macro unit, some people call it, where we're doing a big unit, but the economics of the bedroom is what, where we sort of meet the micro-unit. So, our bedroom is equal to the micro-unit, except now you've got to share the kitchen, you've got to share the bathrooms. By the way, we do four bathrooms. So, we actually have a really good bathroom count, right. If you're a family of six or eight, four bathrooms are, actually, I think, almost more important than bedrooms in some cases. But these are all versions of economic sharing, right.

And I think that's the story of the future, whether it's co-living, whether it's micro-units, whether it's our UTH, you know, bedroom. You know sort of multi-generational family sharing or roommates sharing. These are all different versions of sharing, right. Like, you know, we don't call it fractional, but you can think of it that way. Hey, I don't want to rent a one-bedroom unit with a kitchen and a bathroom that's, you know, 2750 a month. I'm going to rent a bedroom in a unit that maybe I share with other people, and it's going to be 700 bucks a month, right. I mean, that's like the net comparison that you can make. Now, you know, I'm sure 2750, it gets you the killer amenities and the cool pool, and, you know, the hot other sex people in bikini's or short shorts that, you know. Ours aren't highly amended on ties, but, you know, we're also not, you know, trying to serve that particular part of the marketplace. And again, all parts of the market are valid, right. Where all like need housing or have the appropriate incomes will self-select in the places, the neighborhoods, and the type of units that they want to. We're just giving an outlet for families who have six people that live multi-generationally with mom and dad and grandma and adult kids living at home that didn't traditionally have an outlet in the housing market. Like the development marketplace did not have an offer for them to fulfill what would benefit them best in their lifestyle. And that's exactly what we're doing.

Rich: That's a fun fact about the amenities. So, I live in a 236-unit building, A-class building in Downtown, Little Italy, San Diego, and we have a nice pool. But the ownership here is like very mom and pap. So, they own this property, and they own another property next door. The father just passed away and so the son took over. I don't know how much multifamily experience this guy has but he told the maintenance guy here who actually lives here in this property and I'm actually buddies with he's like, this is your property, run it, how you want. So, this maintenance guy literally has the pool heated to a hundred degrees in the middle of winter and we call it the Little Italy Blue Lagoon. It's literally like steaming at night. Our neighbors I've been going down there. It's been amazing. But I'm like, man, that can't be great for their water bill.

Scott: Yeah. That's going to show up in about three months when he starts to see the gas bills and the electric bills stacking up, like, "Oh, what's happening."

Shawn: Yeah. It's going to be a crazy bill.

Scott: Yeah. Yeah. Well, and it sounds like it, right. You know, I mean, any of us who owned and operated apartment units after a while, I mean, you can't be freakishly tight with money, so your project doesn't run well. But neither can you be, you know, just go, right. Do whatever. Money, no object. I mean, I don't know. Maybe if their cash looks so good that he doesn't need to worry about that. Which would be a great problem to have. But none of us here have that, or would we choose that, right.

Mike: Scott, let's get to the final segment of the show called the takeoff round. A series of questions we ask all of our guests. And to start, I'll put a little spin on it since you don't call yourself an investor, you're an entrepreneur. What is the biggest mistake you've made as a real estate entrepreneur?

Scott: Yeah. So, several, the one I always go to is really like how you look at underwriting deals. The way I think of it. The joke I made is when I was a young project manager working for others, like in the development industry, I could make any deal work. Man, hairy deal, tough land, tough seller, environmental issues. Like there's some way I can problem-solve this and make it work. And, you know, I love the energy. I'm still that way. But the reality is when you underwrite a deal, you have to sort of like for your own self, like anybody who's an entrepreneur in real estate is self-selected to be in that industry and they're probably an optimist. Yeah. Right. You know if you weren't, you wouldn't be there, right. And you wouldn't be taking risks, right. But that exact personality trait is what can get you in trouble, right. When you start to be particularly in the early part of anybody's investing or development career, you go, "Oh, I love this deal. The market's 900 bucks for that two-bedroom unit. But I love it so much, but I need 950 to make it work, right. So, let's just put that in the pro forma at 950." I'm using a ridiculous example, but you guys all know this, right. And I like anymore, I go, no. I go, if the market's 900, I either got to be at the market and produce better value, like better amenities, better unit type, better finishes, whatever. Or I have to be an equal unit in finishes or type and be slightly below.

So, like, in our instance for UTH you know, you asked the question about like, you know, what were our comparable? We always look at houses in the neighborhoods where we're building. And then, you know, we look for the cheapest house and that's a good comparable for our unit. Then we want to be two or three or $400 a month below that, right. And like, if we're not if I have to push. Like right now, we're in this story about rising commodity prices. I'm literally in the conversation, I'd go. If commodity prices go up enough and rents don't go up fast enough in conjunction with that. Eventually, we're going to run out of room to make money. Like literally we could not have a model. Now I do think inflation is going to affect all those rent values in commodity prices. But if that's a reality, right? I'm already thinking about it. And that's probably, it could be two, three, four years away, depending on what happens with the US dollar and overseas, you know, commodity prices and labor, all that kind of stuff.

And so, I think the shorthand to say is that you've got to be conservative and you have to have people around you that can tell you what is reality, right. So, I have a friend, a guy named Caleb Roope, and he's probably one of the top affordable housing developers in the nation. He and I had this conversation and he said, you know, so many words, he goes, "You are like me. We're entrepreneurs. We're optimists. Like we have to be that way to sustain, to be creating and running these businesses." Because what I do is, I have people around me that tell me no. Like they'll tell me the reality. Like, no, don't do that. And I don't mean no for no sake. But I mean, somebody who is not entrepreneurial and not an optimist, maybe they're negative or neutral, but they look at it dispassionately and they go, no dude, your rents don't work. This deal doesn't work, right. I can't recommend that you support that. And then, you know, Caleb, in his way, he would make his own decision. He'd take counsel from all his team. And sometimes that was me when we were in deals together. And I always appreciate that, right. Like you have to have a network of people around you that help your negative traits and, you know, suppress your positive traits. Right.

So, if you're weak at accounting, then get a good accountant, right. If you're weak at modeling, get somebody who's really, really good at it, right. The old, you know, don't be the smartest guy in the room type thing. But also, the corollary to that is that you may be the most aggressive risk-taker anyone's ever known, right. An Elon Musk, right. I mean the space industry, right. That's the riskiest. You know it's rocket science, literally a business around rocket science. I would speculate that Elon has people around them that are very engineering centric. And will tell him, at least advise him when or when things will fail or work. And then he makes his informed decision, right. Sometimes they blow up spectacularly, right. Like we've seen his rockets do. Now we work to never have a deal blow up. We have had it happen. But it's been a long time since it's happened. Because for me, I just won't do a deal before I'll do a deal that I think could blow up at least, you know, spectacularly.

Mike: And Scott, if you could go back and tell your 25-year-old self-one piece of advice, what would it be?

Scott: Yeah. I saw this question when you guys put that out. [Inaudible 57:35] question.

Mike: So, you had time to ponder it.

Scott: I did. It was cool. I liked it. So, a couple of things, one is I would tell myself to save and invest much earlier. You know, the life of a real estate entrepreneur and developer is like, you know, it can be and is very boom-bust. You can make just a ton of money and then you can give it back, you know, very, very rapidly. So, to get in the mode of earn, save, and invest is the way I say it. So, in this case, this is the save and invest, right. Actually, in what I want to do, this is a little bit of a joke. I would have said, watch out for this thing called Bitcoin in 2009 and buy a shit ton of that's what I would. I'm being facetious but you get the point. But the other thing I would...

Shawn: [Crosstalk 58:17] too.

Scott: You know, the last thing I'll finish with is to develop your networks of capability before you make the launch as an entrepreneur, right? Like anybody who's a self-selected entrepreneur is like itching to go, man. I want to do my first deal. I want to leave the corporate world. I want to go. And I did that. But I tell people now, you know if I were to do it over and I wasn't 25 at the time I was 32. But I would've said I would've probably stayed for three to five more years in the corporate world. I would have been promoted a couple more times to more like an executive level in the development industry. And what that would have done is that would have put me in contact with major institutional investors, high net worth. And they would have seen me in an executive level for company A or B or C and then when I launched, they go, oh yeah, I knew Scott. He had specific responsibility for this business plan. They execute. It was successful. Blah, blah, blah. And then when you launch, you're already sort of this known commodity but at the senior executive level.

When I left at 32, I had some institutional contacts in the world, but I had to spend three or four years developing my executive capabilities, executing on deals, and raising money at the same time. And so, it just made the difficulty level higher. I mean, it was able to do it. But I like, I would advise to stay that extra little bit of time, but do it with intention, right. Don't just work for three more years and collect a paycheck. And yeah, I learned. I mean, I'm being a little facetious when I say that. But to go look, I know I'm going to be out instead of 32, maybe I leave when I'm 35 or 37, right.

And purposely as a developer, a very specific answer in this developer, I need capital networks. I need people to know me as a good executer in the business of real estate development and at a high level where they could see and work with me in a way that they could trust me. So then when you leave, they go, "Oh, this person, we know them, and we've seen them. They were at Trammell Crow and they laughed and now they go out in their own." Right? You see this a lot, you know, not just real estate development, but senior people leave big companies and they're immediately have backing. Well, that's no accident because that backing was already working with them before in the corporate world. They just transitioned out into the entrepreneurial world, but they brought their networks, those high levels, senior executive level networks with them.

Mike: And finally, Scott, how can Multifamily Takeoff listeners get in touch with you?

Scott: So, a couple of things for your listeners, I'll make this offer. If they go to our website, www.urbanpacific.com/ebook. We've got an eBook called How to Survive and Thrive in a Recession, which I think is a good, timely, you know, eBook that we wrote. And it basically came from a lot of lessons from my time in the 2008 to 2010 recession applied to real estate development, investing and then carry forward to now what we're in 2020. So, if they go there, they can get the eBook. And then while they're there, you know, we've got a contact page. Our entire team's email addresses are on there and anybody can reach out to me. My direct cell phone number is on there. People want to, don't call me, text me. Like I don't answer the phone anymore. Probably like you guys.

And then I would encourage people while they're there go to our Investor Education Section. We have a ton of videos, articles, blog posts. And I think a lot of relevant stuff to people who might be thinking about transitioning from investing in existing apartment assets to being an investor in new construction assets. Obviously, that's where we specialize, but you know how to underwrite apartments. And this is always written from the standpoint of how to educate investors? How to make better assessments of deals, right? Like they've got plenty of opportunities. How can they more effectively assess deals so that they can, you know, protect their money, and make money, right? Investing is investing in people, right in the sponsors and the deals. And the better you are at that as an investor that, you know, the more successful you're going to be.

Mike: A hundred percent. Scott, thanks for joining us, man.

Scott: Okay. Thanks, guys. Appreciate the invite.

Shawn: Thanks, Scott.

Outro: Thank you for listening to the Multifamily Takeoff Podcast. For more information regarding anything multifamily real estate investing-related, or if you would like to subscribe to our weekly newsletter, visit themultifamilytakeoff.com. And be sure to follow the show on Instagram at The Multifamily Takeoff. See you next week.